Although details are not yet clear, according to early reports Gov. Rick Snyder’s proposed Michigan Business Tax replacement appears to be good news for advocates of sound economic policy. Whatever the final details, lowering the tax burden on job providers and making the system much less complex will surely provide a boost for commerce in the Great Lakes State.

Arguably of equal importance, press reports are saying the governor’s proposal would also end the Michigan Economic Growth Authority’s selective corporate tax break and subsidy program, and the state film subsidies as well. Research by Mackinac Center analysts shows that, at best, MEGA creates no new net jobs, and it may actually destroy them.

Specifically, Mackinac Center scholars have performed two separate statistical analyses of MEGA, using different methodologies and time periods. A 2005 study found that for every $123,000 in tax credits offered by the program, just one construction job was created, all of which had disappeared after two years.

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In 2009, the Center zeroed in on MEGA’s effect on manufacturing jobs, and discovered an apparent link — a negative one. That is, for every $1 million in tax credits actually earned by MEGA companies, 95 manufacturing jobs were lost in the counties where the recipient firms were located.

Two other organizations have performed detailed reviews of MEGA program. One also found it to be a job killer, at least relative to an alternative tax regime of lower overall taxes, and the other found modestly positive job creation, but with overall fiscal effects that were still negative.

If the early reports hold up, Gov. Snyder’s proposal appears to be a bold and fresh approach to tax policy in Michigan. Responding to the news, Mackinac Center President Joseph Lehman posed a regretful question: “Imagine how many of Michigan’s 858,800 lost jobs could have been saved if Gov. Snyder’s predecessors had done what he is doing now?”

 

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